"expanded by default"? If you mean the plus icon, then that's to add another chapter (or sub-chapter).
I've never seen such functionality to collapse sub-chapters and have some sort of toggle functionality on the top level chapter. In theory anything should be possible. Good luck.
But... this is nothing to do with the Essential theme or themes in general but all to do with the Book module.
Like Gareth says...this is nothing to do with themes.
However, I see that you have EDITING enabled which could be forcing the TOC to expand.
Try turning Editing OFF and see what happens then?
Let me know what results you get, as it looks like there is a problem with the Book module itself, unless it is a 3rd party plug-in called the TOC Block and not the Book activity/resource as Gareth suspected, in which case that could be the problem..
Can you let us know so that one of us can move this to the correct forum?
I tried turning off the editing with same results. I will look into the Book module issue.